When to Refinance Your Home

Why You Should Consider Bankruptcy to Avoid Foreclosure

Many homeowners are aware that bankruptcy can help you prevent foreclosure thanks to various advertisements that regularly promote this benefit. But, research suggests that in fact bankruptcy may help you avoid foreclosure and even provides evidence that filing is effective in preventing pending sales.

Researchers at the University of North Carolina completed a study that included over 4,000 homeowners who had fixed rate mortgages for 30 years and were more than 90 days late with mortgage payments. Homeowners who
saw foreclosure being imminent sought bankruptcy protection. In this, roughly 70 percent were less likely to have their home be sold through a foreclosure auction.

You can file Chapter 7 bankruptcy or Chapter 13 bankruptcy depending on what you may qualify for, but the study suggested that Chapter 13 filers were more likely by five times to keep their home. So, what is the big deal about bankruptcy when it comes to saving your home?

The automatic stay goes into effect when you file, which is a legal injunction
that stops legal actions against you. You gain more time to develop a
plan for how to proceed financially, organize debts, or even renegotiate
new terms with the mortgage lender. Depending on which chapter you file,
you may have other options to consider such as stripping junior mortgages,
loan modification, make payment arrangements to pay off arrears or missed
payments, or surrender the house and walk away.

Under the automatic stay creditors must follow federal rules giving debtors
more control. You can work with your Dallas / Fort Worth bankruptcy attorney
to develop the best course of action for your situation. In many cases,
bankruptcy has helped debtors reach an agreement with their lenders when
they were unable to reach one on their own.